Restoring faith in public finance.

Since the mid ’70s, there has been a progressive decline in the public’s support for and trust of public finance and services, vividly demonstrated by various taxpayer revolts and initiatives curtailing government expenditures and revenue resources. The best example is Califonia’s Prop 13, a property tax restriction whose far-reaching effects have been dramatically exhibited in the past several years.

In addition, initiatives were passed mandating specific levels of expenditures for education, so local governments often face a Catch-22 situation; restricted revenues and mandated expenditures.

At the same time public support for services, as well as infrastructure and public works improvements and the money spent on infrastructure have declined, the decay of the nation’s infrastructure has become obvious even to the casual observer.

What can be done in this precarious situation to help restore taxpayers’ faith in public finance? A major first step to consider would be requiring the adoption of Best Management Practices by all levels of government, to be audited annually in a manner similar to a financial audit, with the results made public.

While virtually every public agency is required to perform an annual audit, conducted by an independent auditor, to ensure that the public’s funds are accounted for, this type of audit does nothing to scrutinize the use of those funds. As a result, the consumers – or taxpayers – often have no clear concept of the true costs of providing services.

The perception of citizens of the value of the services they are receiving is one of the most important factors in the current chaotic financial situation. Almost daily, the media expose some flagrant abuse of public funds, thus reinforcing the public’s lack of confidence in public finance. Meanwhile, the government in many cases has not developed a way to communicate the value of the services it is providing.

In the private sector, the consumer has the ability to compare prices. Many government services, however, are provided whether citizens want them or not, and there may be little relationship between the amount of funds expended and the results achieved. Also, the documentation of public agency management – audits, budgets, financial analyses – has become incomprehensible to the average person.

Thus, it is vital that functions like budget preparation, capital planning, cost accounting and performance evaluation be brought to a level where the public can understand and appreciate the value of services. And it is imperative that government develop and publicize performance standards or Best Management Practices that are understandable and definable.

Probably one of the most advanced set of performance standards has been developed by the American Public Works Association (APWA). Its manual, “Public Works Management Practices”(Second Edition), provides a clear outline of how to organize the use of management practices, and addresses finance, personnel management, record keeping, public works maintenance and other critical areas.

For example, a capital planning program should be detailed and planned over a specified period of time, according to the APWA guidelines. The program should identify how the capital plan fits into established policies and goals, and how the capital improvement process uses engineering and finance recommendations.

In analyzing their performance, local governments may learn they can compete well with private industry in certain areas, but not as well in others. In any event, there would be some bottom line analysis and accountability that would help restore confidence in public finance.